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DERIVATIVES AND RISK MANAGEMENT
What is a derivative instrument in the context of financial risk management?
A derivative is a financial contract whose value is derived from an underlying asset such as interest rates, currencies, equities, or commodities. It is used primarily for hedging risk or speculation.
What is a swaption in derivatives risk management?
An option giving the right to enter an interest rate swap.
What are the four main types of derivative instruments used in Indian banking?
The four main types are forwards, futures, options, and swaps. Each serves a distinct purpose in managing market risk exposures.
What is a credit default swap (CDS) used for?
Transferring credit risk of a reference entity to protection seller.
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